The British Accounting Standards Board will amend pension accounting rule Financial Reporting Standard 17 to align certain disclosures and valuations with those of International Accounting Standard 19, according to a news release from the ASB. The agency plans to publish the amendment to FRS 17 in December and make the new rule effective for accounting periods ended after April 5, 2007, "although early adoption is encouraged," the release said.
The ASB is making the changes to help accounting statement users better evaluate the financial effects of changes in pension schemes, David Loweth, acting technical director and secretary, said in an interview.
The amendment will require, among major changes, disclosure of principal actuarial assumptions such as mortality rates, Mr. Loweth said. "That has become a big issue in U.K.," he said. "Analysts and investors have found it difficult to determine what impact a change in longevity would have on the liabilities you are showing" for a pension scheme, he added.
Also, the amendment will require the use of the current bid price for quoted securities to determine fair market value, rather than the midmarket value now used.
"Most of the major pension schemes in the U.K. already report on IAS 19 basis, under terms of (EU) regulation," although their U.K. subsidiaries might still be using FRS 17, Mr. Loweth said.